When you complete your budget of income and expenses, and your budget bottom line shows more money spent than brought in, this will create a cycle of debt that no one wants to have.

Help! Expenses more than Income

Do not be discouraged. There are many families who are in this situation. It requires some work, but it is possible to balance your budget.

There are 3 approaches to balance a deficit budget.

  • Income can be increased
  • Expenses can be decreased
  • Combination of both

Increase Your Income

Though your income can come from multiple sources, if it is not covering your expenses, you may need to figure out how you can make more money.

  1. Find a new, better job. It is easier to find a job when you already have one. Try looking for better opportunities that will pay more. If you really like your job, then don’t leave it – try one of the following couple ideas.
  2. Ask for more hours. Ask your employer if it is possible to increase the number of hours worked each week. Let them know you are available and willing to work.
  3. Ask for a raise. If your pay has remained the same for a year or longer, your employer might be open to providing an increase.
  4. Part-time to full-time. If you are currently working part-time, ask your employer if there are full-time positions available. By letting them know you are interested, they may consider you the next time something comes up. Working full-time will not only increase income, but there may also be some benefits for a full-time employee that will mean a reduction in other budget expense items like health care and dental.
  5. Second job. If you are currently working part-time and extra hours are not available, try to find a second part-time position. There are jobs you can do from home like teaching English online, transcribing audio files or even selling your freelance skills on a site like fiverr.com to increase earnings.
  6. Make money on your hobby skills. Consider the possibility of turning a hobby or skill into something you can sell for extra income. Maybe you are a seamstress or a handy person who can set up a side hustle in evening or on weekends doing small jobs. Just make sure that government guidelines are followed, permits are acquired (if needed), and your expenses do not cost more than the final product (especially with selling hand- made items). If you are an expert in a certain area, you may also be able to get work as a guest speaker or teaching workshops in your area.
  7. Sell used items. Get rid of your clutter by selling things online through Kijiji or Facebook groups. Another quick way of creating cash is to have a yard sale.
  8. Know your benefits and how to access them. Even if you do not make any money, you should still file an income tax return each year in order to access government benefits. You cannot get some government benefits if you do not file your taxes, and there are many different benefits and assistance programs available. The booklet Get Your Benefits, is an excellent resource to identify any programs or benefits you might be eligible for. Many of these benefits are only available if you ask for them so be informed about what you might be eligible for.

Decrease Your Expenses

This is usually the easier place to make changes to your budget. Review the expenses and look for any areas where you might be overspending.

All expenditures can be identified as either a “want” or a “need”.

Want – something you would like to have but is not essential. Examples of wants include haircuts, beauty supplies, magazines, Netflix, eating out, new clothing, sports and recreation. These expenses change from week to week and are the most flexible expenses in the budget.

Need – something essential you need to have to lead a healthy life. Needs include expenses like food, shelter, cell phone and basic clothing.

If many of your expenses are “want” expenses, this is the easiest place to cut spending without cutting too much out of your life. Decreasing the frequency of these items may be enough to balance your budget.

Beware of the purchases that are things you “need” like food or cell phone. You can still be overspending on these things without realizing what you could be saving. Examples of this are upgrading technology when it isn’t necessary, poor cellular phone plans, or buying food items in pre-packaged, more expensive ways. Reducing food costs is a good place to start. Read Save Money at the Grocery Store.

If you are honest with yourself, there are usually things that can be eliminated to decrease expenses. These “nice to have” items do not have to be cut from your life forever, but cut them at least until you have more income or you can balance your expenses with the income you have. Read more about Simple Ways to Save Every Day.

Ways to decrease your expenses:

  1. Stop buying things you want, and only purchase essentials. Cut back your expenses significantly by identifying what you actually need. If your clothes are still in good shape, maybe you can do without buying anything new.
  2. Become a savvy shopper. Save money in every area of your life. Be a smart grocery shopper, wait for sale prices, shop second-hand and be proactive about ways you can save money every day.
  3. Consolidate your debt to lower interest costs. If you carry debt in multiple places (credit card, line of credit, bank loans, car dealership loan) you are likely paying a significant amount in interest charges. Talk to your banker about consolidating your debt into one lower interest loan that can be paid down over time. Use any extra money that this single payment creates to pay down the debt.
  4. Re-examine basic expenses like television and phone provider. Check that all of your subscribed channels are actually watched. If not, remove them (even for a couple of months) to save money. Phone bills often include charges for things like voicemail and call-waiting. Remove these options if you don’t need them. Call your provider to ask if there are discounts available for long-term customers – there often are but you won’t receive them unless you ask.
  5. Watch your family data usage. Going over data use can be very expensive in overage charges. Encourage family members to see if there is free Wi-Fi to connect to when they are out rather than using data.
  6. Carpool when you can. Running a vehicle is expensive, so if it’s possible, try to share the costs. Expenses can include gas, parking, insurance, repairs and maintenance. If you don’t drive often, check into organizations that share vehicles like the Peg City Car Co-op. With a low-cost membership, you can book a vehicle online when you need it.
  7. Barter for things you need. Rather than donating or throwing out items, use them to barter with others to get items you need. A clothing swap works great for saving money. Bartering can also be done with skills you have. Trade your skills for something needed.
  8. Check your insurance coverage is appropriate for your needs. There are different types and levels of vehicle insurance depending on why and how much the vehicle is driven. Consult with your insurance agent to make sure you have the basic level of what you need. Homeowners insurance (either for a house or rental) can have different add-ons that increase your cost. On the flipside, there are often discounts to your home insurance expense for things like home security systems or home upgrades. Your insurance agent can help explain the policy coverage to get the most suitable coverage for your family.
  9. Share expenses with others. Are there family or neighbours in a similar financial situation? They may be interested in sharing resources. Create a babysitting co-op where members trade babysitting (no cash is exchanged), or a food sharing group that allows for bulk grocery purchasing. Shop and cook together to create several different meals while sharing costs.
  10. Keep your eye on the big budget picture. Keep the goal of decreasing expenses in your mind every day. Stay out of stores and shopping sites unless you really need something. Encourage friends to less expensive outings (a game of outdoor tennis, walk in the park or movies at home). Once your finances are more stable, you can review your budget again and make more adjustments that allow you to enjoy more of the things you want.

Read these articles next:
Using Credit Wisely
Tracking Expenses and Record Keeping